What are Tax-Free States?
In the United States, any product purchased at retail or online is subject to sales tax, with rates varying by state and reaching up to 10%. However, there are 5 states with no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. These states compensate for fiscal revenue through other forms of taxation (such as property tax, income tax, or business income tax).
Sales Tax Policies by State
| State | State Sales Tax | Local Sales Tax | Digital Goods Tax Features |
|---|---|---|---|
| Alaska | None | Some areas have up to 7.5% | Digital goods may be covered by local sales tax in ARSSTC jurisdictions, depending on delivery location. |
| Delaware | None | None | Digital goods are completely tax-free, with no state or local sales tax. |
| Montana | None | None | Digital goods have no state or local sales tax, consumers are tax-free. |
| New Hampshire | None | None | Digital goods are completely tax-free, but some services (like telecommunications) may involve other taxes. |
| Oregon | None | None | Digital goods are completely tax-free, with no sales tax. |
Detailed State Introductions
Alaska
Although Alaska has no state sales tax, it allows local governments to impose local sales tax, with rates typically ranging from 0% to 7.5%. According to the Alaska Municipal Sales Tax Program, all digital goods and services delivered to ARSSTC jurisdictions should be subject to sales tax. This ARSSTC is a local government alliance that coordinates remote sales tax, and as of now, it is estimated that over 100 communities may have local sales tax. Consumers need to check the specific tax rate for their location, for example, Juneau has a local sales tax rate of 5%.
Note:If you filled in an Alaska address when registering your Apple ID, you might need to pay tax on in-app purchases later. It depends on which city you filled in at the time.
Delaware
Delaware has no state sales tax and no local sales tax, with tax-free policies that have remained unchanged for a long time. It is one of the five completely sales tax-free states in the United States. For users, Delaware provides the simplest zero-tax environment without worrying about any additional taxes.
Digital goods (such as Steam in-app purchases, Pornhub subscriptions, ChatGPT upgrades, etc.) are completely tax-free in Delaware, and consumers do not need to pay any sales tax when purchasing. This makes it a popular choice for digital goods purchases.
Montana
Montana has no state sales tax and no local sales tax applicable to digital goods. Some cities and resort areas may impose local sales tax on specific goods (such as clothing), but digital goods are explicitly exempt.
According to the Montana Sales Tax Guide, digital services including Software as a Service (SaaS) are not affected by state or local sales tax. Consumers purchasing items like Google Play in-app purchases or ChatGPT Plus do not need to pay sales tax.
New Hampshire
New Hampshire has no general sales tax and no local sales tax, but imposes specific taxes on certain goods and services (such as dining and accommodation). Digital goods (such as e-books, streaming subscriptions) are completely tax-free. Software downloads and subscription services do not involve sales tax, but some telecommunications-related digital services may have other taxes (such as 9% dining tax), but this does not affect general digital goods.
Oregon
Oregon has no state sales tax and no local general sales tax, with legislation repeatedly refusing to introduce sales tax. Digital goods are completely tax-free, including downloaded software, subscription services, and in-app purchases. Some cities may have local taxes on prepared foods, but this does not apply to digital goods.
Advantages of Digital Goods Purchases
For users who frequently purchase digital goods, choosing tax-free state addresses can bring significant cost savings:
- Software Subscriptions:Such as Adobe Creative Suite, Microsoft Office, etc.
- Gaming In-App Purchases:Steam, Epic Games, mobile games, etc.
- Streaming Services:Netflix, Spotify, YouTube Premium, etc.
- Online Services:ChatGPT Plus, cloud storage services, etc.
Important Notes
Important Reminder:When using tax-free state addresses for purchases, please ensure compliance with relevant laws and regulations. Some services may require real residential addresses, please use reasonably according to specific circumstances.
Conclusion
US sales tax-free states provide significant shopping advantages for consumers, especially in digital goods purchases. Delaware, Montana, New Hampshire, and Oregon provide completely tax-free environments, while Alaska requires attention to local tax situations. Understanding these states' tax policies can help consumers save shopping costs legally.